Deep dive: Circular procurement & buyer requirements — the fastest-moving subsegments to watch

In 2024, venture capital investment in circular economy startups reached $14.3 billion—a staggering 286% increase from 2022 levels—while the global circular economy market expanded to $656 billion with a projected trajectory toward $2.66 trillion by 2035 (Circularity Gap Report 2024; Spherical Insights 2025). Yet paradoxically, global material circularity has declined: the Circularity Gap Report reveals that only 7.2% of materials consumed globally are now secondary or recycled, down from 9.1% in 2018. This 21% deterioration in five years, even as circular procurement mechanisms proliferate, underscores a critical tension between policy ambition and operational reality. For investors, procurement leaders, and sustainability executives, understanding which subsegments are genuinely scaling—and which remain trapped in pilot purgatory—has become essential to capital allocation and strategic planning in the circular economy transition.

Why It Matters

Circular procurement represents the demand-side lever for accelerating the circular economy transition. Unlike supply-side interventions (recycling infrastructure, materials innovation), buyer requirements create immediate market signals that cascade through supply chains. When procurement specifications mandate recycled content, design for disassembly, or product-as-a-service contracts, they fundamentally reshape supplier economics and investment incentives.

The regulatory environment is accelerating this shift dramatically. The UK's Procurement Act 2023, which came into force on October 28, 2024, explicitly enables circular criteria in public tenders. The EU's Corporate Sustainability Reporting Directive (CSRD) now mandates harmonized ESG disclosure, including circularity metrics. ISO 59004:2024 has established the first international standard for circular procurement and sourcing, providing a common framework for specification development. Most significantly, the EU Circular Economy Act consultation closed in November 2025, with binding requirements for circular procurement expected in 2026 implementation.

The financial case compounds the regulatory imperative. Companies implementing circular procurement strategies are achieving 15-35% raw material cost savings, while businesses demonstrating strong circular economy credentials now access capital at interest rates 1.2-1.8% lower than industry averages (European Investment Bank 2024). Meanwhile, 78% of institutional investors now evaluate circular economy metrics when assessing portfolio companies, transforming circularity from reputational nicety to material financial factor.

Key Concepts

Understanding circular procurement requires distinguishing between several interconnected but distinct mechanisms:

Recycled Content Requirements specify minimum percentages of post-consumer or post-industrial recycled materials in purchased goods. These requirements vary by material stream—25% recycled plastic in packaging versus 95% recycled steel in construction—and verification mechanisms range from supplier attestations to third-party certification.

Design for Circularity Specifications mandate that products meet disassembly, repair, or remanufacturing standards. This includes modular design enabling component replacement, material standardization facilitating recycling, and documentation requirements (bills of materials, disassembly instructions) that persist through product lifecycles.

Product-as-a-Service (PaaS) Contracts shift procurement from ownership to access, with suppliers retaining asset ownership and responsibility for end-of-life management. This model aligns supplier incentives with durability and circular recovery, as the supplier—not the buyer—bears disposal costs.

Take-Back and Buy-Back Agreements embed reverse logistics commitments into procurement contracts, requiring suppliers to accept returns and specify recovery guarantees. These provisions increasingly include residual value sharing mechanisms that distribute economic benefits of material recovery between buyers and suppliers.

Digital Traceability Requirements mandate IoT, blockchain, or digital product passport implementation to track materials through supply chains. The EU's Digital Product Passport requirements, phasing in from 2026, are accelerating adoption of these specifications.

Sector-Specific KPIs for Circular Procurement

Sector	Primary KPI	Typical 2024 Range	Leading Performer Benchmark
Electronics	Recycled content (%)	15-30%	>45%
Construction	Material passport coverage	20-40% of projects	>75% of projects
Textiles/Fashion	PaaS revenue share	2-8% of revenue	>15% of revenue
Automotive	Remanufactured parts (% of service parts)	8-20%	>35%
Packaging	PCR plastic content	20-35%	>50%
IT/Office Equipment	Device lifecycle extension (years)	3-4 years	>6 years

What's Working

Public Sector Leadership Creating Market Proof Points

Forty-three European cities now feature in the European Investment Bank's October 2025 guide to circular public procurement, demonstrating scalable implementation models. Riga, Latvia's Circular Economy Hub achieved 100% second-hand furniture procurement for municipal offices, reducing costs by 40% while diverting 12 tonnes of furniture from landfill annually. These public sector deployments de-risk circular procurement for private sector followers by establishing verified supplier bases and validated specification language.

Electronics and IT Equipment Demonstrating Viable PaaS Models

The device-as-a-service segment has matured rapidly, with Everphone securing €270 million in January 2024 to scale its mobile device leasing and refurbishment operations for enterprises. The economic logic is compelling: PaaS providers retain residual value from refurbishment cycles, enabling pricing 15-25% below equivalent purchase costs while achieving 85%+ device recovery rates. Raylo's UK operations demonstrate similar economics for consumer electronics, extending device lifecycles by 2.3 years on average.

Construction Circularity Specifications Reaching Contract Templates

Construction holds the largest circular economy market share by sector, driven by waste-to-material conversion requirements and design-for-disassembly specifications. Major developers are embedding material passport requirements—digital documentation of all materials used—into contractor specifications. This creates the data infrastructure for future material recovery while meeting emerging regulatory requirements.

AI-Powered Procurement Platforms Reducing Implementation Friction

Procurement technology startups like Matchory (AI-powered supplier discovery), Najar (data-driven sustainable sourcing), and Tealbook (supplier intelligence) are embedding circular criteria into platform workflows. Rather than requiring procurement teams to develop circular expertise, these platforms operationalize circular requirements through supplier scoring algorithms and specification templates.

What's Not Working

SME Exclusion from Circular Supply Chains

High upfront costs for circular infrastructure—certification, traceability systems, take-back operations—are systematically excluding small and medium enterprises from circular supply chains. Large buyers implementing circular procurement specifications often find their supplier bases narrow to major incumbents capable of investment, undermining both competition and the innovation that smaller suppliers typically provide.

Verification Gaps Enabling Greenwashing

The absence of standardized circularity metrics creates verification challenges that undermine procurement effectiveness. Recycled content claims vary in definition (post-consumer versus post-industrial), measurement methodology (mass balance versus physical traceability), and verification rigor (self-attestation versus third-party audit). Procurement teams lack both the expertise and data infrastructure to validate supplier claims consistently.

Pilot-to-Scale Transition Failures

Many circular procurement initiatives remain trapped in pilot programs that demonstrate feasibility without achieving operational scale. The transition from "innovation showcase" to "standard operating procedure" requires procurement system modifications, staff training, and supplier development investments that organizations underestimate. The Circularity Gap Report's finding—7.2% global material circularity despite proliferating circular initiatives—reflects this scaling deficit.

PaaS Model Limitations in Capital-Intensive Sectors

While PaaS models have proven effective in electronics and office equipment, sectors with higher capital intensity face structural barriers. Industrial machinery, transportation equipment, and building systems involve asset values and lifecycle durations that strain PaaS economics. Supplier balance sheets cannot absorb retained asset ownership at scale, while financing costs for PaaS inventory erode the margin structures that make the model viable.

Key Players

Established Leaders

TOMRA Systems (Norway) operates the world's largest network of reverse vending machines and has expanded into sensor-based sorting solutions for recycling facilities. TOMRA's technology enables the material recovery that circular procurement specifications require, making them an infrastructure player behind circular supply chains.

SUEZ (France) provides end-to-end circular economy services including waste management, material recovery, and water treatment. Their circular procurement consulting helps major buyers develop and implement specifications while connecting them to SUEZ's recycling and materials processing infrastructure.

Cisco (USA) has pioneered circular models in networking equipment, offering certified refurbished products, trade-in programs, and circular design principles. Their Refresh program demonstrates enterprise IT circular procurement at scale, providing blueprints for other technology procurement.

Interface (USA) revolutionized circular procurement in commercial flooring through its ReEntry program, taking back used carpet tiles and recycling them into new products. Interface's 25-year journey from linear manufacturer to circular economy exemplar provides implementation roadmaps for industrial sectors.

SAP (Germany) has embedded circular economy functionality into enterprise resource planning software, enabling procurement systems to track circularity metrics, manage take-back programs, and report on circular KPIs at scale.

Emerging Startups

Circularise (Netherlands) provides blockchain-based supply chain transparency specifically for circular economy applications, enabling verified recycled content claims without revealing proprietary supplier relationships. Their technology solves the verification challenge that undermines many circular procurement specifications.

KWOTA (Global) digitizes global supply chains for recycled materials, creating registries that track material flows and verify carbon reductions. This infrastructure enables circular procurement at commodity scale.

Sykell (Germany) offers software for managing circular assets—reusable packaging, containers, pallets—at scale. Their platform addresses the operational complexity that limits take-back program expansion.

Rheaply (USA) operates an asset exchange platform that enables organizations to redeploy surplus equipment internally or between partner organizations before disposal. The platform has facilitated over $50 million in asset reuse.

Sourceful (UK) connects businesses to sustainable packaging suppliers, simplifying the procurement of recycled and recyclable packaging materials through a digital marketplace model.

Key Investors

European Investment Bank (EIB) has committed €16 billion to circular economy projects by 2025, having deployed €3.83 billion across 132 projects from 2019-2023. The EIB's Circularity Europe Fund specifically targets early-stage circular startups.

Circularity Capital (UK) operates the largest UK fund focused exclusively on circular economy investments, targeting companies with proven business models in waste reduction and material efficiency.

The Ellen MacArthur Foundation operates an investment initiative targeting early-stage circular business models globally, combining capital deployment with the Foundation's convening power and technical expertise.

Joint Initiative on Circular Economy (JICE) unites development banks from Poland, France, Italy, Spain, Germany, and the Netherlands with a €16 billion commitment. JICE exceeded its initial €10 billion target in 2023 with €11.57 billion deployed.

Project A Ventures (Germany) has led multiple funding rounds for circular economy and procurement technology startups, including €4.7 million investments in circular supply chain solutions.

Examples

1. Microsoft's Circular Centers

Microsoft has established Circular Centers at its data center locations globally, focusing on extending server lifecycles and maximizing component reuse. In 2024, these centers processed over 3 million server components, achieving 90% reuse rates for servers reaching end-of-service life. The program reduces e-waste, captures residual component value, and reduces the carbon footprint of data center operations. Microsoft's circular procurement specifications now require server vendors to design for disassembly and provide remanufacturing documentation, cascading circular requirements through their supply chain.

2. Philips' Equipment-as-a-Service Transformation

Philips Healthcare has transitioned significant portions of its medical imaging equipment business to equipment-as-a-service models, retaining ownership of CT scanners, MRI machines, and ultrasound systems. This shift aligns Philips' incentives with equipment durability and recoverability, as they bear end-of-life costs. Philips' refurbishment operations in the Netherlands and USA process over 6,000 systems annually, extending equipment lifecycles by 5-7 years while reducing costs for healthcare providers by 25-35% versus new equipment purchases. The model has proven particularly effective in emerging markets where capital constraints limit new equipment purchases.

3. IKEA's Buyback and Resale Program

IKEA's furniture buyback program, launched in 2020 and expanded globally through 2024, accepts used IKEA furniture in exchange for store credit. The program has collected millions of furniture pieces globally, reselling them through dedicated "Circular Hubs" within stores at 30-50% discounts. Beyond consumer sales, IKEA has extended circular procurement internally, specifying recycled materials for new production (all cotton now from sustainable or recycled sources) and designing new product lines explicitly for circular lifecycles. The program demonstrates circular procurement implementation across both supplier specifications and customer-facing operations.

Action Checklist

Conduct baseline assessment of current procurement spend eligible for circular specifications (typically 40-60% of indirect and 15-30% of direct spend)
Update RFP templates to include circular criteria: recycled content percentages, design for disassembly requirements, take-back provisions, and digital traceability specifications
Require ISO 59004:2024 alignment from strategic suppliers and include circular economy implementation roadmaps in supplier qualification
Implement Total Cost of Ownership (TCO) evaluation methodology that accounts for end-of-life value, disposal costs, and lifecycle carbon pricing
Pilot Product-as-a-Service contracts in IT equipment, furniture, or fleet vehicles where PaaS economics are proven and supplier options exist
Mandate digital product passports or equivalent traceability for high-value materials (electronics, textiles, construction materials) to enable future circular recovery
Establish supplier development programs for strategic SME suppliers to fund circular capability building and prevent supply base consolidation
Integrate circular KPIs into procurement team performance metrics and executive reporting dashboards

FAQ

Q: What percentage of procurement spend is typically eligible for circular specifications? A: Analysis suggests 40-60% of indirect procurement (office equipment, facilities, services) and 15-30% of direct procurement (production inputs) can incorporate circular specifications with current market maturity. However, maturity varies dramatically by category—IT equipment and furniture have robust circular options, while specialty chemicals and some industrial inputs lack viable alternatives. Organizations should prioritize high-volume, standardized categories where circular suppliers exist and specifications have precedents.

Q: How do circular procurement requirements affect supplier relationships and pricing? A: Initial implementations often narrow supplier bases and increase unit costs by 5-15% as fewer suppliers meet specifications and compliance costs are passed through. However, mature implementations—typically 18-36 months post-launch—see cost normalization as supplier capabilities develop and competition increases. Organizations achieving 15-35% raw material cost savings typically realize gains through reduced disposal costs, extended asset lifecycles, and residual value capture rather than unit cost reductions.

Q: What verification mechanisms exist for recycled content and circularity claims? A: Current verification spans a spectrum from supplier self-attestation (lowest rigor) through chain-of-custody certification (moderate rigor) to physical traceability systems using blockchain or IoT (highest rigor). Standards bodies including ISO, ISCC (International Sustainability and Carbon Certification), and GRS (Global Recycled Standard) provide certification frameworks. However, no universal standard exists, and procurement teams must specify verification requirements explicitly. The EU's Digital Product Passport requirements, phasing in from 2026, will establish mandatory traceability for key product categories.

Q: How should organizations sequence circular procurement implementation? A: Successful implementations typically follow a three-phase approach: (1) Low-friction categories with established circular suppliers and proven specifications (IT equipment, office furniture, packaging) in years one through two; (2) Strategic categories requiring supplier development and specification innovation (production inputs, services) in years two through four; and (3) Complex categories requiring industry collaboration and infrastructure development (specialty materials, capital equipment) in years four and beyond. Each phase builds organizational capability and supplier relationships that enable subsequent phases.

Q: What role does procurement technology play in scaling circular specifications? A: Procurement platforms increasingly embed circular criteria into standard workflows—supplier scoring algorithms that weight circular capabilities, specification templates with pre-built circular language, and reporting dashboards that track circular KPIs alongside traditional metrics. These tools reduce the expertise burden on procurement teams, enabling circular specifications without requiring every buyer to become a circularity expert. Organizations should evaluate platform circular capabilities alongside traditional procurement functionality when selecting or upgrading procurement technology.

Sources

Circularity Gap Report 2024. Circle Economy Foundation. https://www.circularity-gap.world/2024
European Investment Bank. "COP29: Circular economy investments deliver social, economic and environmental benefits." November 2024.
Spherical Insights. "Circular Economy Market Size, Share and Global Report, 2030." 2025.
ISO 59004:2024. "Circular economy — Vocabulary, principles and guidance for implementation." International Organization for Standardization.
Joint Initiative on Circular Economy (JICE). "Progress Report 2024." European Investment Bank and Partner Development Banks.
Precedence Research. "Digital Circular Economy Market Size 2025 to 2034." 2025.
UK Government. "Procurement Act 2023." Legislation.gov.uk. Effective October 28, 2024.
OECD. "Monitoring Progress towards a Resource-Efficient and Circular Economy." June 2024.